Question

Thrifty Tax Services, Inc. was organized in 2018 to provide tax and accounting services to small businesses. The following are balance sheet values as of June 1, 2018:

Cash                                       $ 1,400

Accounts receivable                    750

Supplies                                       210

Equipment                                 8,200

Patent                                        5,900

Accounts payable                                                600

Notes payable                                                        -0-

Common Stock                                                 2,000

Additional Paid in Capital                    12,000

Retained earnings                                             1,860

Total                                       $16,460         $16,460

Consider the following transactions that occurred during June 2018:

Sold 1,000 shares of $1 par value stock for $10 per share to investors.

Borrowed $7,500 from a local bank signing a promissory note due at the end of two years.

Purchased miscellaneous supplies on account for $350.

Billed a client $2,000 for tax preparation services.

Paid a $650 bill from the local newspaper for advertising for the month of June. The ad appeared in the paper during June.

Received $500 from the client billed in entry (4).

Received cash of $1,400 for services provided in preparing a client’s tax return.

Purchased computer equipment for $4,000 in cash.

Paid $1,650 in salaries and wages for June.

Received and paid the $700 bill for June utilities.

Required

1. Enter beginning balances in T-accounts.

2. Prepare journal entries for each transaction.

3. Post the entries to the T-accounts. Key your entries with the transaction letters used here.

4. Prepare a classified balance sheet for the month ended June 30, 2018. The ending balance in Retained Earnings as of June 30, 2018 (after closing entries) is $2,260.

Answer 1

Journal entries
Transaction	Account Title	Debit	Credit
1	Cash	$ 10,000.00
	Common Stock		$    1,000.00
	Additional Paid in Capital		$    9,000.00
	(Common Stock Issued)
2	Cash	$    7,500.00
	Notes Payable		$    7,500.00
	(Loan Received)
3	Supplies	$        350.00
	Accounts Payable		$        350.00
	(supplies Purchased)
4	Accounts Receivable	$    2,000.00
	Fee Earned		$    2,000.00
	(Client Billed)
5	Advertisement Expenses	$        650.00
	Cash		$        650.00
	(Advertisement Expenses Paid)
6	cash	$        500.00
	Accounts Receivable		$        500.00
	(Cash Received against Balance due)
7	Cash	$    1,400.00
	Fee Earned		$    1,400.00
	(being fee earned)
8	Computer Equipment	$    4,000.00
	Cash		$    4,000.00
	(Computer Equipment Purchased)
9	Salary	$    1,650.00
	cash		$    1,650.00
	(being salary paid)
10	Utilities expenses	$        700.00
	cash		$        700.00
	(Payment made against credit balance)
		$ 28,750.00	$ 28,750.00

Cash Account
	Opening Balance	$    1,400.00		Computer Equipment	$    4,000.00
	Common Stock	$    1,000.00		Salary	$    1,650.00
	Additional Paid in Capital	$    9,000.00		Utilities expenses	$        700.00
	Notes Payable	$    7,500.00		Advertisement Expenses	$        650.00
	Accounts Receivable	$        500.00		Closing balance	$ 13,800.00
	Fee Earned	$    1,400.00
		$ 20,800.00			$ 20,800.00

Accounts Receibables
	Opening Balance	750		Cash	$        500.00
	Fee Earned	$    2,000.00		Closing balance	$    2,250.00
		$    2,750.00			$    2,750.00

Supplies
	Opening Balance	210		Closing balance	$        560.00
	Accounts Payable	$        350.00
		$        560.00			$        560.00

Equipment
	Opening Balance	$    8,200.00		Closing balance	$ 12,200.00
	Cash	$    4,000.00
		$ 12,200.00			$ 12,200.00

Notes Payable
	Closing balance	$    7,500.00		Opening Balance	$                 -
				Cash	$    7,500.00
		$    7,500.00			$    7,500.00

Common Stock
	Closing balance	$    3,000.00		Opening Balance	$    2,000.00
				Cash	$    1,000.00
		$    3,000.00			$    3,000.00

Additional Paid In Capital
	Closing balance	$ 21,000.00		Opening Balance	$ 12,000.00
				Cash	$    9,000.00
		$ 21,000.00			$ 21,000.00

Retained Earnings
	Closing balance	$    2,260.00		Opening Balance	$    1,860.00
				Profit earned	$        400.00
		$    2,260.00			$    2,260.00

Fee Earned
	Closing balance	$    3,400.00		Accounts Receivable	$    2,000.00
				Cash	$    1,400.00
		$    3,400.00			$    3,400.00

Salary
	Cash	$    1,650.00		Closing balance	$    1,650.00
		$    1,650.00			$    1,650.00

Thrifty Tax Services
Balance Sheet
As at 30th June 2018
Assets
Current Assets
Cash	$ 13,800.00
Accounts Receivables	$    2,250.00
Supplies	$        560.00
Total Current assets	$ 16,610.00
Equipment	$ 12,200.00
Patient	$    5,900.00
Total assets	$ 34,710.00
Liabilities and Shareholder's Fund
Liabilities
Current Liabilities
Accounts Payable	$        950.00
Notes Payable	$    7,500.00
Total Current Liabilities	$    8,450.00
Shareholder's Fund
Common Stock	$    3,000.00
Retained Earning	$    2,260.00
Additional Paid in Capital	$ 21,000.00
Total Liabilities and Shareholder's Fund	$ 34,710.00